Basement Developments Are on the Rise

The number of basement and other subterranean residential developments have risen dramatically in recent years, with homeowners looking to maximise their home’s potential – whether they be modest suburban projects or mega-basements in central London mansions – digging down is certainly on the up.

Unlocking extra space clearly has huge advantages in terms of adding extra value and is always an attractive proposition, however, the new trend is becoming a very contentious issue in some London communities with neighbours often facing disturbance during construction as well as raising structural concerns.

In light of mounting residents pressure, some London authorities have tightened their planning policies and procedures when considering such applications, however, the planning starting point remains the same; whether the basement requires planning permission or whether it is permitted development under the Town and Country planning order.

It would appear that the interpretation of the law varies from one local authority to another, with Kensington and Chelsea, Westminster and Camden having accepted a more hard-nosed approach to subterranean expansion and making Article 4 directions restricting Permitted Development rights.

Now, any basement development within these boroughs requires Planning Permission, then it assesses against planning policy. The three authorities also have policies that restrict the size of basements to 50% of the site cartilage or garden area and restrict excavation to one level down.

Richmond Borough Council, given the increase in demand for this type of work, has published a detailed advice guide, available here.

Successful basement development is certainly still possible despite great scrutiny, and with the help of the right legal team and advisors, alongside an experienced project management and construction company, there is no reason to discount the option for your home.

It is of course also important to carefully consider all planning, building regulation and party wall legislation and (where applicable) freeholder’s consents when acquiring a property with a basement conversion already in place.

Our Property Team would be delighted to advise you on any Residential or Commercial matter, so please call us today on 020 8977 8621.

Why Your Company Should Have A Shareholders Agreement

A shareholders agreement is a contract between the shareholders of a company that determines how a company will be run. However, there is no legal requirement for the shareholders of a company to enter into a shareholders agreement. Without a shareholders agreement, a company will be run in accordance with its articles of association and general company law (under statute and case law). Why then should you bother with a shareholders agreement?

1. Bespoke clauses to fit your company’s needs

The majority of companies are set up using standard format articles of association which do not go into anywhere near the level of detail you can go into in a shareholders agreement. Bespoke clauses can be drafted to meet the specific needs of your company dealing with matters as varied as shareholder responsibilities, dividends policy, minority shareholder protection and share transfer procedure.

2. Shareholder Disputes

It is not uncommon for shareholders to disagree. Even in companies with a husband and wife as the only two shareholders, disputes may arise (in fact, perhaps it is even more common in this scenario!). A shareholders agreement can set out the method of resolving a dispute leading to a quicker and more effective resolution and often preventing the dispute in the first place.

3. Management of the Company

Generally, the board of directors are in charge of the day to day running of the company with statute requiring only certain decisions be made by the shareholders. Under a shareholders agreement the shareholders can regain further control over the company by requiring that the directors obtain shareholder consent for certain decisions. The restrictions on board decision making can be as strict or lenient as the shareholders require.

4. Privacy

A shareholders agreement is a private and confidential document between the shareholders. There is no requirement for a shareholders agreement to be made available to the public (unlike articles of association which must be made available at Companies House).

5. Death or Incapacity of a Shareholder

In the unfortunate event of the death of a shareholder, without a shareholders agreement, the deceased’s shares will likely pass through their estate to a spouse or family member. This incoming shareholder may not, for any number of reasons, be an ideal business partner for the surviving shareholders. Equally, the deceased shareholder may not have intended to burden their family member with membership to the company. A shareholders agreement can prevent this by providing an option for the surviving shareholders to purchase the shares from the deceased’s shares. A similar option can be implemented for when a shareholder loses capacity to act.

6. Minority Protection

As stated under paragraph 3 above (Management of the Company), a shareholders agreement can include provisions so that certain decisions can only be made with shareholder consent. This can be extended to protect minority shareholders by requiring that certain decisions can only be made with the unanimous consent of all the shareholders. Common examples of decisions requiring unanimous consent are changing the company name, amending the company’s articles of association, changing the registered office and issuing further shares.

7. Majority Protection

Circumstances may arise where a shareholder who owns the majority of the shares in a company wants to sell their interest to a third party buyer but as a minority shareholder does not want to sell their shares as well, the third party buyer withdraws from the transaction as he cannot acquire 100% of the company. This can be prevented by the addition of ‘drag along’ provisions in a shareholders agreement which provide that if the owner of a certain percentage of the shares in the company wishes to sell their shares to a third party then that majority owner may force the minority shareholders to also sell their shares to the third party.

8. Business Stability

A shareholders agreement can demonstrate the stability of the business which in turn can assist in raising corporate finance from banks or creditors.

If you would like further information, you can speak to a member of our staff on 020 8891 6141, or contact Jamie Jones or Paige Symns to discuss your shareholder agreement or other aspects of company formation. 

People with Significant Control need to Register

The Small Business, Enterprise and Employment Act 2015 (the “Act”) received Royal Assent on 26 March 2015 and has been and continues to be implemented in stages. As of 6th April 2016, Companies are required to keep a register of ‘people with significant control’ over it (a PSC Register) and from 30^th June 2016 Companies will be required to send the information on the PSC Register to Companies House where it will be accessible to the general public.

Who are ‘people with significant control’?

Under the Act, a person with significant control is an individual (either alone or as one of a number of joint holders of the share or right in question) that meets one or more of the following conditions:

• holds more than 25% of the shares in the company (including holding the shares indirectly for example as a beneficiary of a trust)
• controls more than 25% of the voting rights in the company (either directly or indirectly)
• has the power (directly or indirectly) to appoint or remove a majority of the board of directors of the company;
• has the right to or otherwise exercises signification influence or control over the company.
• has the right to exercise or actually exercises significant influence over a trust or firm which in turn falls within any of the above categories in relation to the company.

There are broadly equivalent provisions for the PSC register of an LLP.

Obligations

Companies are obliged to take reasonable steps to find out if there is anyone who is a registrable person which includes investigating and sending notices to persons they know or have reasonable cause to believe are registerable persons requesting they confirm their details. Failure by the Company to act accordingly is an offence punishable by imprisonment (for its officers) or a fine.

Individuals are placed under a proactive disclosure obligation if they receive a notice from the Company and they know or ought to reasonably know that they are a registrable person. A Company may issue a restriction notice against an individual who fails to respond which may have the effect of freezing the individuals interest in the affected shares, preventing the individual from not only transferring the shares but from voting and receiving dividends.

What to do next

Companies must prepare a PSC Register listing people with significant control, take steps to identify people with significant control and contact them to confirm their details. Companies must then register their PSC Register at Companies House or face the risk of criminal penalties.

There are special circumstances when Companies House will allow individuals to keep their details off the public register. However these circumstances are limited to when publishing an individual’s details would put that individual in danger of harm or intimidation (for example, directors of pharmaceutical companies may receive threats of violence from animal rights activists and so are often successful in applying to keep their details from the public register ).

If you would like further information, you can speak to a member of our staff on 020 8891 6141, or contact Jamie Jones or Paige Symns to discuss these further or other aspects of company formation.